The Universal Service Fund (USF) is the tax on your phone line that subsidizes connections for rural and lower income households, as well as schools and libraries.  The USF program has a long history of waste and abuse.  However, thankfully Congress is working hard on a bill that would reform the fund.  It contains a number of necessary provisions that would reign in wasteful spending, especially by redefining and limiting who exactly is eligible for payments.  However, ATR is still concerned that the legislation doesn’t a cap the overall size of the multi-billion dollar fund.  The USF rate sits at 15.3% today, rising 5.8% since President Obama’s new FCC took over in 2009.

This weekend, I had a piece in the Washington Times highlighting one Hawaiian company that has built their entire business model around accepting USF taxpayer money, mostly thanks to their political connections.  From the op-ed:

[Sandwich Isles Communications] has siphoned off millions of dollars from American taxpayers in recurring payments. A congressional report last year labeled Sandwich Isles as one of the largest abusers of USF funding, accepting as much as $26.4 million in 2008 to connect just 1,967 households to the Internet. That's a whopping $13,408 in subsidies for each home. In 2009, the company raked in another $24 million.

Last year, the National Exchange Carrier Association (NECA) stalled the abuse by ruling that Sandwich Isles could not receive subsidies related to the cost of building a new interisland fiber network. … Sandwich Isles immediately demanded that the FCC intervene to reinstate the subsidies, and it ramped up a lobbying campaign to keep the spout of federal dollars running. Creating a company reliant on taxpayer money requires political connections, and Al Hee, the company's founder, certainly has plenty. The company has employed former Democratic state legislators, and a family friend who chaired the Hawaiian Homes Commission approved its original license to operate.

Click here to read the entire op-ed.